City insurance group taking Allstate increase to court

December 13, 1990|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

In yet another insurance skirmish, Baltimore Fair Auto Insurance Rate has filed an appeal in Baltimore Circuit Court to a decision by Insurance Commissioner John A. Donaho not to hold another hearing on an increase for Allstate Insurance Co.

The appeal, filed yesterday, came the same day that Mayor Kurt L. Schmoke gave $26,000 for a feasibility study into establishing a non-profit insurance firm that may offer lower rates to city drivers.

Baltimore FAIR's appeal was directed against a 3 percent increase granted to Allstate by the state Insurance Division in May.

The Illinois-based Allstate is the second largest automobile insurer in the state with $220 million in coverage for 375,000 cars.

Baltimore FAIR has targeted the practice of territorial rating, which involves insurance companies charging different rates depending on where the policyholder lives. Insurance companies say this practice is necessary because of the difference in accident claims in different areas.

However, Baltimore FAIR has contended that this practice is illegal. In its appeal of the Allstate case, it went even further and said the pattern of rate charges may be unfairly biased against blacks.

"Maryland law prohibits rates which are unfairly discriminatory and the the commissioner has approved a rate which is unfairly discriminatory," said City Council President Mary Pat Clarke, who heads Baltimore FAIR.

The group based its claim on a statistical study done by Dan Friedman, a legislative assistant to Clarke, with help from professors at Johns Hopkins University and the University of North Carolina.

However, the Insurance Division, which had an actuarial review of the report, found the study "definitely lacking," said J. Frank Nayden, assistant commissioner for property and casualty.

He said the group's request for another hearing was turned down by Donaho because it did not show that Allstate violated any state regulations. "They have presented nothing to indicate they [Allstate] are not in compliance," he said.

In fact, he said the Baltimore FAIR study itself showed that insurance losses in different areas accounted for 90 percent of the difference in rates.

On another front, a study of the feasibility of a non-profit insurance firm will now begin because of a $26,000 grant from the city.

"We want to make sure this feasibility study is done," Schmoke said yesterday at a meeting of the city Board of Estimates.

The City Wide Insurance Coalition, a group formed a year and a half ago to create a non-profit insurance operation, has been campaigning for the feasibility study for more than a year. "It's a big step forward," said CWIC President A. Robert Kaufman.

The city had agreed during the summer to provide half of the $52,000 needed to do the study. CWIC so far has raised about $17,000 of the other $26,000, Kaufman said.

But instead of waiting until the full amount is raised, Schmoke said he decided to release the city's portion early. "It was my view that we could help in fund-raising if we released these funds at this time," he said.

The money will be paid to R&B Inc., a business consulting firm, and to the Morgan State University Institute for Urban Research.